Unit 1 the Business Environment P5

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Unit 1 Exploring Business Activity Assignment 3 P5

In this essay I will be describing how three external factors are impacting upon the business activities and stakeholders of John Lewis and Oxfam.

The first of the three external factors I have chosen is the credit crunch. The credit crunch is a decline in the availability of loans or a tightening of conditions required to take out a loan from banks. It also means that there are reductions on the interest rates set up by banks for saving. Credit crunches are normally caused by a period of careless and risky lending to people who don’t necessarily fit the exact requirements, these careless decisions lead to no return and leave the banks losing a lot of credit.

Impact in business activity

John Lewis

The credit crunch has a big impact on all organisations but a bigger impact on department stores as they have more products to manage and must make sure that they are not losing out in profit because of the public saving back money. This means for John Lewis a loss of total income meaning they might not be able to afford to give out certain wages, thus resulting in loss of jobs over the entire organisation. With the loss of many jobs comes a possibility of having to restructure the business’ organisation chart trying to think of what ways to manage staff is the most effective. Because of the loss of overall income there is also a reduction budget over all of the operations they can do, this means careful decision making in order to not lose money.

Oxfam

The credit crunch also affects charities such as Oxfam who rely on the public for donations. Having a economical climate like the credit crunch means less people willing to donate as they need to save money due to the lack of loans and the recent cut on interest rates. Having people not donating will lose publicity for Oxfam and they will need to get the message out that it is still important that they receive donations even though in the hard financial times everyone is in. They will do this by marketing on either TV or maybe a less expensive advertisement such as local fliers handed out door to door. The credit crunch will reduce their budget significantly and will tighten all financial operations in order to avoid losing money.

Impact on stakeholders

John Lewis

The credit crunch also impacts the stakeholders of every organisation. For John Lewis this is relevant as the managers have to implement new business structures and attend meetings as to what structure is the best decision to act on. Shareholders have a negative impact as their shares that they bought with John Lewis will decrease with loss of profits and income. This causes a lot of stress and panic for people who have invested a lot of money with John Lewis as they aren’t sure whether they will get it back. On the flip side, the share prices will have been lowered and for people who are looking for cheap investments can buy a lot of shares up in hope of a recline in profits and share value. The very top of the managing board (the owners) have big decisions on what managers to remove and what staff is really necessary, this is devastating as managers or even staff relationships could have been built up over many years and will now have to be fired. The credit crunch also affects the employees of John Lewis as they must adapt to the new structures and new work mates, they must also receive training on how to avoid wasting resources as to keep to the budget given by their management.

Oxfam

Oxfam’s stakeholders are also affected by the credit crunch, this is evident as the mangers have to work around the new budget restrictions given to them and launch new market operations to persuade people to become volunteers. They must run more advertisements to try and get more people in hard financial times like this as they will not have as much time to be doing volunteer work due to the extra struggle to find cash.

The second of the...
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